GERMAN MONEY MARKET SPLIT ON LOWER RATE PROSPECTS
  Remarks by central bankers raised some
  hopes the Bundesbank will cut rates on securities repurchase
  pacts, but operators remained divided on the likelihood of a
  move in the near term, money market dealers said.
      Comments by Bundesbank board member Claus Koehler yesterday
  that rate cuts were needed to curb money supply growth from
  speculative capital inflows, and by West Berlin state central
  bank president Dieter Hiss that there was no natural lower
  limit to the discount rate had, however, no immediate impact.
      Call money declined to 3.65/75 pct from 3.75/85 pct but the
  drop was tied to extra liquidity in the market, dealers said.
      Dealers said the Bundesbank's latest liquidity allotment
  this week dashed some hopes of lower rates.
      The Bundesbank allotted only 6.1 billion marks yesterday in
  new liquidity in a repurchase pact at an unchanged rate of 3.80
  pct, thus subtracting some 8.8 billion marks from the market,
  as an outgoing 14.9 billion pact expired.
      But some dealers said the smaller volume awarded by the
  pact was in line with present liquid money market conditions,
  and did not exlude a cut in the repurchase pact rate soon to
  3.70 pct if money market rates continue at present levels.
      The next opportunity for the Bundesbank to lower rates on
  repurchase pacts will be in a tender expected next Tuesday.
      Bundesbank officials have already said they favour more
  discreet rate adjustments through repurchase pacts, rather than
  the more public adjustment of leading rates.
      The Bundesbank may either set a fixed allocation rate and
  allow banks to tender for the volume, as has been the case
  since it lowered its discount rate January 22, or else it may
  allow banks to tender for the rate and set the volume itself.
      Dealers expect volume of the tender to be lower than the
  15.2 billion marks flowing out, to offset other incoming funds.
      Some seven billion marks is expected to flow in next week.
  This should then flow back into the market as it is deposited
  with banks.
      Banks were well supplied with liquidity, holding 61.5
  billion marks in reserves at the Bundesbank on Tuesday.
      Holdings of average daily reserves over the first seven
  days of April stood at 59.6 billion marks, still above the
  estimated 51 billion required for all of April.
  

